If Northern Rock wasn't nationalised already, it is now for practical purposes. The Treasury, not the Bank of England, will be underwriting the loans to the stricken bank. Though chancellor Alistair Darling said "any future solution must lie with the company," it is clear where power lies. The bank's statement to the stock exchange said: "The [tripartite] authorities have made clear to the company that they will evaluate any proposal it puts forward against their objectives."

Those objectives are financial stability and the protection of consumers and taxpayers. It's not just a whiff of politicisation - it's a strong smell, and perhaps we shouldn't be surprised. Thousands of jobs are at risk.

The vulture funds hovering over Northern Rock might also note the mention of consumers' interests. Some of those consumers will hold Northern Rock mortgages; it would be a poor political outcome if a buyer of Northern Rock sought to profit by bumping up exit penalties or by raising variable rates above other lenders'.

The plot is getting messier, and we can guess why. It would seem the authorities under-estimated the scale of funding required by Northern Rock. The sum borrowed from the Bank of England is now thought to be nearly £13bn, which is enormous.

Thus the state-backed aid has to be cranked up to levels not imagined when the crisis broke: all deposits, whenever made and of whatever size, will be guaranteed and all forms of collateral will be acceptable. The patient is receiving round-the-clock intensive care.

The life-support machine will run until next February. If you are an optimist - like those punters piling into the shares - you will view it as sufficient time for Northern Rock to find a saviour. Alternatively, you could think of it as the government crossing its fingers and praying that something turns up.

Either way, if you are a would-be bidder for Northern Rock, you might decide to delay your move until the government is truly desperate to get the problem away from taxpayers.

One final hurrah

Here is a rough report from the front-line of the credit squeeze, courtesy of a City economist with several years' experience in money markets: it's a joke to think we are back to normal conditions; big clearing banks will lend to each other for one- and two-month periods, but it's still hard to get three-month money; nobody really wants to lend beyond the end of this year; life is still extremely tough for second-tier banks; we might muddle through, but the outlook could easily deteriorate.

Our economist says that when he passes this intelligence to colleagues in the equity department, who are enjoying the sight of share prices at seven-year highs, he provokes gasps of horror.

It's very odd. Forecasts for economic growth are being reduced on both sides of the Atlantic, and yet the stock market sees only blue skies. What is going on?

The short answer is that stock markets value two pieces of data above all others. The first is interest rates: stock markets like them to be low, and that is what is in prospect. The Federal Reserve has cut by a half-point. Rates in Britain have clearly peaked, and a cut may arrive as soon as next month.

The second is corporate earnings. Here there is no rush to downgrade. In the US yesterday, two bellwether companies even sounded cheerful. Wal-Mart lifted its estimate of third-quarter earnings and Pepsico said current trading was "very strong".

You can see the bulls' argument: lower interest rates make companies' dividend yields more attractive; solid earnings make the dividends more reliable.

But common sense, as well as our economist, says this line of thinking is far too simple. Central banks are attempting to avert a serious economic downturn while keeping a cap on inflation; the task may yet prove impossible, and oil above $80 a barrel doesn't make the job easier.

The current batch of strong corporate earnings could easily turn out to be a final hurrah before tougher times arrive. Certainly most British consumer-related companies don't seem to share the optimism.

Then there is the on-going credit turmoil. It would be comforting to think the worst is past, but it is far too soon to know. Yes, the scars suffered by Wall Street's investment banks in last month's earnings updates were relatively modest, but the process of re-pricing off-balance-sheet assets has only just begun. It will probably take months to complete.

Of course, there has been a simple lesson in stock markets over the past five years: don't bet against the bulls. But it's rarely looked so tempting as now.